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EU Finds Against Polish Retail Tax

by Ulrika Lomas,, Brussels

04 July 2017

The European Commission has concluded an investigation into a Polish tax on the retail sector and found that the measure breaches EU state aid rules.

The measure was passed in July 2016 and entered into force on September 1, 2016. On September 19, the Commission opened an in-depth investigation, and asked Poland to suspend the application of the progressive rates until it had completed its investigation.

Under the tax, companies in the retail sector were due to pay a monthly tax based on their turnover from retail sales. The measure featured a progressive rate structure with three different brackets at rates.

The Commission said that it had not been notified by Poland of the measure, and that in August 2016 it received a complaint alleging that the tax was in breach of state aid rules.

The Commission has now concluded that the progressive tax rates based on turnover give companies with low turnover an advantage over their competitors. It said that smaller companies would pay either no retail tax or face a lower average tax rate than larger companies.

It added that smaller companies should pay less tax than their larger competitors in absolute terms, but still in the same proportion to their turnover.

The Commission stressed that it does not question Poland's right to decide on its taxation systems or on the objective of different taxes and levies. However, it said that the tax system must comply with EU law, and cannot unduly favor certain companies over others.

According to the Commission, Poland has not demonstrated that the progressivity of the retail tax was justified by the objective to raise revenues, or that companies subject to the higher rates would have a higher ability to pay.

Poland is now required to remove what the Commission said was the unjustified discrimination between companies under the retail tax and restore equal treatment in the market.

Because Poland did not collect the tax, the Commission said that no state aid was effectively granted. There is therefore no need for recovery in this case.

TAGS: compliance | tax | European Commission | tax compliance | law | tax thresholds | tax rates | Poland | tax reform | retail | European Union (EU) | Europe

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